Investment News & Views

Growing optimism propels Guardian portfolios back to 100% equity.

The announcement on Monday by Pfizer and BioNTech revealed an over 90% efficiency for their coronavirus vaccine and caused a huge jump in equity values. There are still several hurdles to complete before the end of the coronavirus is near, but this is a milestone in scientific achievement. This proves that it is possible to create a vaccine for the coronavirus and with many other similar vaccines in trial, this is extremely promising. Leaders throughout the world have hailed this achievement while also reinforcing the need to remain cautious ahead of a harsh winter and as further restrictions have been applied throughout Europe.

England also started their national lockdown on the 5th of Nov. To continue to support the economy, the Bank of England has extended its quantitative easing programme and Rishi Sunak has extended the furlough scheme until the end of March. Unfortunately, the announcement of this extension came too late for many. In the three months to the end of September, the UK unemployment rate was 4.8% as around 314,000 workers were made redundant. According to the ONS, 2.5 million people remain reliant on the furlough scheme. This will undoubtedly protect the livelihoods of many, but with the second coronavirus wave and further restrictions many businesses will continue to struggle.

Last week, markets rebounded as it became apparent that Joe Biden and Kamal Harris looked set to win an historic election. Although there was not a blue sweep as many had forecasted, the ‘red mirage’ of in-person voting eventually turned to blue as mail-in ballots were counted. This left Biden with more electoral college votes than the required 270 to win and millions more popular votes than Trump. Although President Trump has raised legal action against the results in several states, many of these suits have already been dismissed. It may turn out to be a further protracted result, but Biden is moving forward and on Monday already announced his first appointments to his coronavirus task force.

The final two seats which will decide the control of the Senate have automatically entered a runoff election to take place in January. A Republican controlled Senate will hinder the amount which the Biden presidency will be able to complete and a Democratic one will give him a broader platform for change. Biden has had a long and solid working relationship with the current Senate majority leader, Mitch McConnell, and is one of the few individuals who has a chance at bridging the gap between Republicans and Democrats. It has been a bitter election so compromise and healing may take time. Either way, it appears that the Federal Reserve and the government will be continuing to support the economy and most likely will pass further stimulus packages.

The news of Biden’s presidency increases the pressure on Boris Johnson to complete a Brexit trade deal. Trump has been a protectionist leader and supporter of Brexit, while Biden is less so. Although it has been reported that Boris Johnson was the first European leader to receive a call from Biden post-election, Biden will have a number of priorities and a UK trade agreement may not be at the top of his list. Biden has cautioned against any actions which could endanger to the protections for Northern Ireland set out in the withdrawal agreement, but also appears to be sensitive to the UK’s interests and the importance of the relationship between the two countries.

Guardian Update

In our last investment committee meeting, the rebounds over the past week had already started to have an impact on the underlying trends. We decided to move 100% back into all equity markets. The European and UK markets, where we had been partially out, have both benefited from the overall equity rebound. With continued central bank support and the raised stakes of a Biden presidency on a future Brexit agreement, we think these markets have the potential for recovery.

Green Path Update

We have also made one modification to our Green Path allocation. We have made a slight reduction in the UK and property to move this allocation to a clean energy fund. This fund has performed exceptionally well. We believe that clean energy will continue to be in high demand throughout the recovery from the coronavirus and due to the significance and awareness of climate change. Biden has also stated that clean energy is one of his priorities as part of his ambitious $2tn economic proposal.

We completed this change through an asset switch instead of a rebalance to reduce trade costs.

  • Thursday, November 12, 2020

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Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.